Greek PM sings in tune, now must hit the hard notes

September 02, 2012|Deepa Babington | Reuters

In a bid to overcome the allies' concerns about protecting poor Greeks, the government wants to force those earning more to share a bigger burden of the cuts - from a 2 percent wage cut for low-wage earners to a 12-14 percent reduction for high-income earners, a government official said.

STUMBLING BLOCKS

Far tougher for Samaras to pull off will be incremental structural reforms to make the economy more competitive and efficient, including overhauling its notoriously ineffective tax collection system.

Greece has notched up some limited progress - deregulation in the trucking industry has pushed fees for licenses down to about 2,000 euros each from as high as 180,000 euros previously. But efforts to open up other tightly guarded professions such as pharmacists have been repeatedly thwarted by powerful lobbies.

Moves to streamline the public sector, which employs almost a fifth of the country's 4.2-million workforce, are routinely blocked by unions who are quick to strike and point out that Greece's constitution bars firing civil servants.

The government is also under pressure to show it can push through long-delayed privatizations, which the source close to the troika says is still among Greece's "biggest stumbling blocks".

The administration quickly resolved the issue of troubled state lender ATEbank by handing it to rival Piraeus and now appears ready to settle the fate of another loss-making state-controlled bank, Hellenic Postbank, after saying it was not viable. But Greece is still a long way short of its targets for privatization proceeds this year.

"We need a quick win on privatizations," the government official acknowledged.

"When we came to the government, we realized that we don't only have a financial deficit, but also a deficit of credibility, which is much more dangerous, because no-one would talk to us. The first step is to regain credibility."

(Additional reporting by Harry Papachristou and Karolina Tagaris; Editing by Will Waterman)